Commenting on the Financial Conduct Authority’s Business Plan 2021/22 published today, David Morrey, Partner, Financial Services Group, Grant Thornton UK LLP, said:

“This year’s Financial Conduct Authority (FCA) Business Plan describes a financial services industry that is changing fast due to technology, a consumer population that is increasingly vulnerable, and critical wider imperatives to improve diversity and inclusion and act against climate change.

"The FCA sets out an ambitious agenda for change and is set to expand its objectives from consumer protection and market integrity to include improving diversity and enabling a sustainable future. But the greatest changes are in the way the FCA intends to use its powers. These include:

  • setting higher standards before a firm becomes authorised, and doing more to confirm a newly authorised firm is following the rules
  • intervening faster if it thinks there is harm – this is not the first time that objective has been voiced, but now it is to be backed up by a transformation in the FCA’s data capability aimed at automating how harm is identified
  • moving more high-profile decisions (on enforcement, bans and other sanctions) from the FCA Board to the FCA Executive, which will increase the speed with which the FCA can act, but reduce oversight of those decisions
  • be more aggressive in testing the limits of its powers and of the rules, where it thinks there is an issue that needs a rapid response

“A regulator making faster decisions and happy to test the limits of its powers should get more done than ever before, but ultimately it draws its powers from statute and we can, therefore, expect some pushback from firms that feel it has overstepped itself.

"The FCA showed in the business interruption court case last year that it is prepared to take the industry to court, and it will be interesting to see if some in the industry now decide that the FCA’s intention to push the limits of its powers makes court action to define those limits more palatable.

“The FCA’s proposed 4% increase in fees (to £614 million) is similar to the Prudential Regulation Authority (PRA), and indicates a modest expansion, reflecting inflation, as well as the regulator's increase in responsibilities post-Brexit and its growing focus on operational resilience and technology.

"It does, however, mean that the £40 million pa to be spent on its data-led transformation will need to be financed by budget reductions in some existing areas. A regional location structure is also announced, adding Leeds, also recently selected by the Bank of England (BoE), to the existing small presence in Edinburgh and main base in London.”